Different Types of Management Accounting Systems

This document provides an overview of different types of management accounting systems, including inventory management system, cost accounting system, job costing system, and price optimization method. It discusses the benefits of each system and how they contribute to the overall management of a company. The document also includes examples and explanations of management accounting reports and planning tools used in management accounting.

Management Accounting

Table of Contents
Introduction......................................................................................................................................3
TASK 1............................................................................................................................................3
P1. Different type of management accounting system................................................................3
P2 Different type of management accounting reports.................................................................5
TASK 2............................................................................................................................................6
P3. Range of management accounting techniques......................................................................6
TASK 3..........................................................................................................................................10
P4.Planning tools used in management accounting...................................................................10
TASK 4..........................................................................................................................................12
P5. Comparison of organisations adapting management accounting to respond to financial
problems....................................................................................................................................12
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................15

Introduction
The today's market condition demands an appropriate technical management style which can
track the company's valuable operation to increase the competitiveness of companies (Collis and
Hussey, 2017). Management accounting is characterised as an essential method in which useful
financial information may, for the purpose of reaching a strategic decision by the Manager of
certain organisations to maximise income over a particular time span is measured, tracked and
managed. The entire expenditures or budgetary control process starts when the valuable
company financial information is gathered, processed, recorded, calculated, assessed and
circulated, which leads in such a predetermined period to the achieving goals required. KEF
LTD, a manufacturing corporation, is selected to help illustrate the purpose of accounting
management. This study reveals a knowledge of many systems and studies, calculates the
outgoing costs per unit, P&L accounts over the budget duration, etc. by helpful assessment
models. The research further discusses use of such various methods for predicting operational
efficiency as well as how various perspectives can better facilitate the organisation approach.
TASK 1
P1. Different type of management accounting system
The concepts of MA are understood to be unique to each company and make it easy for the
overall production of different classes within the organization to be measured or assessed.
Supervisors usually set performance evaluation criteria by reviewing various methodologies
which facilitate the achievement of defined objectives and also help to provide true explanation
for differences in the actual schedule (Schaltegger, Burritt and Petersen, 2017). MA usually
offers non-financial and also financial proof to the managers and now all operational staff to
produce the most suitable decisions for optimising sales, productivity and meeting goals.
Managing financial statements sponsored KEF Ltd leadership have indeed been various
significant, and are described below:
Inventory management system: This software provides supplies of handle firms, goods
transacted and the finished commodity in the appropriate amounts. There are alternative
techniques like FIFO, LIFO and Average for controlling financial assets that give the process
management trust. KEF Ltd follows the FIFO approach, but old products must be eliminated
with this methodology and therefore losses due to faulty products must be minimised. To start

with, KEF Ltd allows manufacturing goods that serve markets and consumers, while maximising
benefit.
Cost accounting system: this will be used to evaluate the cost of the very same net
production of the goods of a particular business. It generally includes gross costs on various
occasions, requiring even fixed costs to help assess the profit. There are comparable financial
techniques like median cost and fixed cost, lean charging, activity and a daily expense method.
Throughout the respective business, the ABC stock estimation approach is applied, primarily
assigning total costs for products marketing and product (Humphrey and Miller, 2012).
Job Coasting system: the expense of delivering efficient governance in the business is
mostly understood in this strategy. The product manager and auditor have evidence of each type
of product, and it allows manufacturing costs to be passed to each other commodity. This method
therefore facilitates the measurement during the same duration of the expense of the various
goods manufactured by the firm. This method therefore allows in KEF Ltd to determine and
predict the expense of various goods of valuable firms to satisfy customer demand.
Price optimization method: this is considered the largest system of the business as it aims
to recognise the customers' reaction to the firm's set production revenue volumes. Managers are
being used to set respectable retail prices that can satisfy consumers and raise profits. KEF Ltd
targets at providing the highest import pricing in terms of overcharge cognitive impairment and
enticing customers to maximum profit.
Benefits of different system
Different accounting
systems
Benefits
Inventory management
system
 It helps organisations to use available goods and services
to meet particular goals.
 This approach facilitates a thorough monitoring of the
current inventory and certain requests of suppliers so as to
increase profitability (Holsapple, 2013).
Job Costing system  This approach provides reasonable stability in estimating
and mitigating costs for single employees of KEF Ltd.
 Workers performance records are kept to prepare for the

required adjustments with the help of such a operating
system.
Cost accounting system  The cost equation primarily attempts to measure the
average cost of the goods through the cost calculation of
raw resources, manufacturing overhead and overhead
costs.
 The key importance of this system is to have adequate
assistance in designing plans and other effective methods
in order to increase profit
Price optimization system  This approach offers productive assistance, also for KEF
Ltd products, to allow a simple presentation.
 A framework which promotes the establishment of the
cheapest prices for the better is one of the major benefits
in the price system.
P2 Different type of management accounting reports.
The following are primarily four forms of papers.
Budget study: Budget report promotes small-scale market research. It is compared with the
actual spending of the previous year. It compares to spending and revenue operations. This report
contains all accounts for operations relating to revenue and spending. The declaration shall not
include any account relevant to benefit and loss. The implementation of this study specifies the
costs that are much superior to their fixed standard. The spending figure should be used in the
budget's results. The same study is used for expenditures on the company's financial statements.
But this information is highly advantageous to the organisation.
Cost analysis: All inventory labour and overhead information are covered by the data table.
Cost management accounts also cover material waste, hourly staffing expenses and operating
costs. They have an accurate view of all the costs that are important if all the departments are to
maximise money. Cost reports support administrators in estimating costs of unrefined data
products.
Performance reports: This result is developed to analyse the quality of an entire company
at the time of withdrawal. In very large organisations too, different department’s progress

statements are prepared. Managers make critical decisions about the growth of the industry using
these success reports. Individuals are also rewarded to the Company for their contribution and
are fired off or processed as necessary by performers. Management accounting reviews on results
often provide a deep glimpse into some kind of company's operations. If companies conclude
that the company must do so but that does not, these documents will point out that the
management of a company to defect in the schedule. The task of performance reviews is
important for every organisation to maintain a detailed measure of its project strategy.
Receivable Aging Reports: Monitoring business AR ageing in daily rates Weekly/monthly
lets businesses detect problems before becoming a corporate cash flow problem. This is a
monthly audit, which classifies the finances of a corporation by the span of an invoice. It is used
as a tool to assess consumers' financial wellbeing. When a single client pays late, the company
will assess the terms of service of payments and make appropriate adjustments. That also lets the
organisation keep the supply of products/services before the buyer spends the price on a set due
date.
In order to obtain the desired outcome, the management most valuable knowledge is to
evaluate the actual activity of the organisation as well as the net income and cost produced on
these activities. The internal administrators, who are often concerned to make significant plans to
improve market efficiency and intend to raise revenues, are often needed to include this valuable
details. The information gathered is important on a daily basis primarily at the end of a busy day
in order for management to assess the overall efficiency and the areas needed for potential
progress. The key sources of knowledge are the daily briefing by the internal employees and the
administrators are active in various external operations.
TASK 2
P3. Range of management accounting techniques.
Absorption cost: this simply means that something relevant to a certain function is gained or
consumed. This covers in general here all expenses involved in manufacturing a single
commodity unit. The biggest drawback to this method is that it provides the total cost of
production, but does not contribute to decision generation (Grabner and Moers, 2013).

Costing margin: it is defined by the added costs incurred by businesses in order to purchase an
extra factor to maximise performance. Throughout this cost accounting only variable costs are
included, although now operating costs are calculated against investments.
The income statements of Capital Joinery Ltd by using both the methods are shown below:
Direct materials 60
Direct labour 40
Variable production cost 20
Fixed production cost 20
Full production cost 140
Income statement:
Particulars May June
Sales 25000 18750
Less: Cost of sales
Direct materials 6000 4800
Direct labour 4000 3200
Variable production cost 2000 1600
Fixed production cost 2000 1600
Opening stock 0 0
Closing stock 0 700
Under/Over absorption 0 400
Gross profit 11000 7850
Less: Expenses
Variable sales commission 500 375
Fixed administration 3000 3000
Fixed selling 1000 1000
Net profit 6500 3475
Marginal costing:
Total cost of production:

Direct materials 60
Direct labor 40
Variable production cost 20
Full production cost 120
Income statement:
Particulars May June
sales 25000 18750
Less: Variable cost
Direct materials 6000 4800
Direct labour 4000 3200
Variable production cost 2000 1600
Opening stock 0 0
Closing stock 0 600
Variable sales commission 500 375
Contribution 12500 9375
Less: Fixed cost
Fixed production 2000 2000
Fixed administration 3000 3000
Fixed selling 1000 1000
Net profit 6500 3375
Reconciliation statement:
Particulars May June
Net profit under absorption costing 6500 3475
Add/Less: Closing stock 0 (100)
Net profit under marginal costing 6500 3375

Calculation of material
variances
Budgeted Actual Variances
Materials cost per unit £24 £18.67 £5.33
Inventory ledger record LIFO Method
Dat
e Description Sale/Purchases Balance
Unit
s
Cos
t Total
Unit
s
Tot
al
Jun
-01
Opening
Inventory 10 £35 £350 10
£35
0
Jun
-09 Purchases 15 £38 £570 25
£92
0
Jun
-15 Issued -12 £38 -£456 13
£46
4
Jun
-20 Purchases 10 £32 £320 23
£78
4
Jun
-23 Issued -10 £32 -£320 13
£46
4
Jun
-27 Issued -3 £38 -£114 10
£35
0
Jun
-30 Issued -2 £35 -£70 8
£28
0
Average cost methods
Dat
e Purchases
Unit
s
Cos
t Total
Jun
-01
Opening
Inventory 10 £35 £350

Jun
-09 Purchases 15 £38 £570
Jun
-20 Purchases 10 £32 £320
Total 35
£1,24
0
Average cost of Inventory =
Total/Units
= 1240/35
= 35.42857143
TASK 3
P4.Planning tools used in management accounting.
Company defines the schedule of spending as a useful text, which could be expected by an
organisation to generate beneficial estimates in a given timeframe of net income and spending.
This seems to be an interactive plan of a budget that allows KEF Ltd to take decisions, such as:
• The very first step is associated with sorting hypotheses based on the nature of the
business climate.
• However the problems that can delay action on outcomes and consequences are
addressed.
• Adequate time frames such as annual, monthly, etc are calculated.
• Estimate of each expenditure group, including income and spending.
• Gross revenues are reported over authentic and full results are correlated with the results
estimated (Morden, 2016).
• In order to make the analysis of future expenditure more reliable, the problems and
drawbacks are addressed.
The main reason for budgetary preparation is allegedly to minimise uncertainties for
organisations that could occur due to disparities in actual budget output to regular budget results.
KEF Ltd. produces various forms of expenses schedule as a planning facility to improve the
method of budget management. Under the following will be:

Flexible schedules budget: This software is helpful in adjusting the annual transactions of
the company because of a catastrophe or misunderstanding that really cannot run according to
the old rate of financing. This budget is intended to include new investment which can be
generated from any conceivable KEF Ltd situation, but it seeks to regularly track new prospects
for profit development for a fiscal year. The flexible budget of KEF Ltd is focused on
improvements that emerge from new semi-variable oversight output. The below are the different
advantages and disadvantages:
Advantages:
It makes internal managers take necessary action to cut costs since it is essentially ready
for the current trends of business (Siverbo, 2014). This budget allows KEF Ltd management to
enable possible enhancements and adjustments to the total costs and to maximise revenues
through various activities.
Disadvanatges:
This form of budget, including skilled work, is difficult and complex. There is little
incentive for the employee of KEF Ltd, who has to invest more capital into the recruiting of
skilled workers.
Zero-based budgeting: the much more effective form of fiscal management is known to
promote the mechanism of establishing a new spending schedule without any applicable
legislation. The protocol of ZBB reassesses each object within the cash flow but also describes
the additional fees incurred in separate fields. In KEF Ltd, the entire budget relates to calculating
the overall costs of the output of luxury goods on the basis of actual past knowledge spending.
The advantages and disadvantages listed below are distinct:
Advantages:
This strategy provides for performance, accuracy, and results as all working capital
elements are reassessed. Basically, ZBB provides stronger and more open interdepartmental
connectivity, such that decisions are taken more efficient and precise (Booth, 2018). This is a key
budget that help to eliminate KEF Ltd's several features to increase sales.
Disadvantage:
The major challenge which requires professional work and far more time to forecast
performance. The budget itself does not have the experience to plan a proposal. In order to

explain how this budget functions, the organisation has to schedule daily meetings to raise
external expenses and harmful effects on the benefit.
Cash Budget - Receipts and cash transfers for a defined duration shall be reflected on in
cash Budget. It is a study after a certain duration of revenues and expenses. The cash budget
indicates possible taxes and funds transfers. If payments are greater than revenues, successful
cash management is enforced. When there's any excess supply, spending is smaller than income,
so there is a decision to use the surplus.
Benefits- In crises, when money is scarce as well as the spacing is full. A correct bank
balance allows customers to pay on deadlines, allowing managers to collect monthly payment
rewards.
Drawbacks- This budget focuses only on money and disregards both these factors that
diminish this current budget relevance in strategic policy.
SWOT analysis- A business, group of companies may initiate a SWOT analysis. In truth,
the study represents a variety of project objectives. The SWOT approach can be used in order to
evaluate and try to reduce a commodity or company, transaction or strategic alliance. SWOT
assessment also helps evaluate the origin, sequence, item or technology requirements (van der
Steen, 2011).
Benefits - An organisation, coordination system can be influenced by the SWOT analysis.
In fact, a number of project goals will be achieved. For example, SWOT method could be used to
assess and outsource a service or company, a method or connection. SWOT assessment also
helps quantify accurate production sources, sales cycles and demands for commodities or
technical acceptance.
Drawbacks: The SWOT evaluation is based on the four different types of assets,
weaknesses, perspectives and threats.
Budget operating – Budgets within more future earnings as well as expenditure periods
are expected for operating costs. The management team generally establishes an overall budget
well before beginning of the year because specifies the associated confidence thresholds over the
entire period. This budget has some major advantages and disadvantages, as follows:
Benefits: The company's advantages in effectively managing its activities by evaluating
and forecasting the true efficiency of the various operations.

Drawbacks - The time-consuming assignment of this Expenditure is the categorization of
operational activities and standard costing.
Labour budget: The direct production schedule shall be used to measure the amount of
working hours needed for the production budget pieces (Wagenhofer, 2016). The overall amount
of time necessary is demonstrated by a much more detailed direct labour budget, it could also
dissolve these details by job division. They schedule the staff spending in this restricted aspect of
Capital Joinery, which aims to strengthen the working relationship. It provides the following
advantages and disadvantages.
Advantages:
Any indirect expenses which change to some degree in terms of number of employees,
provided that the payroll allowance is commensurate with the development fee.
Disadvantages:
The framework delivers poor results since rising average salaries are paid towards
additional employment when employees earn an extra salary. However, overhead rates will
climb similarly.
TASK 4
P5. Comparison of organisations adapting management accounting to respond to financial
problems.
Each individual organisation today faces different types of difficulties in the market world,
which are necessary if whole business and commercial operations are to be reduced. The
financial state is influenced by a variety of various things, including not making enough profits,
raising demand and satisfying workers, etc. The following list shows many financial challenges
facing KEF Ltd:
Lack of management money: This financial concern has a greater impact on the operations of the
organisation because there's no person allowed to administer the resources correctly. Investments
are made in different advertisement campaigns and regardless of technical management
requirements the company cannot collect revenue (Lachmann, Knauer and Trapp, 2013).
Custom order: In effect, due to the rise in average output bit by bit, the company sacrificed the
development of more special units produced mostly on needs of customers. When management

have the risk to build a special demand, they are not pleased with the overall production for the
day. This limits the customer base and gives competitors a frontier.
KEF Ltd uses many main MA approaches to determine the numerous insights that help strategic
planning to deliver the most successful results. Below is outlined the basic accounting approach
for determining the solution to the financial problem:
KPI: This aid tracks employees' overall productivity inside the company and provides useful
feedback for enhancing profitability. The progress indicator thus helps to describe the cumulative
expenditure and the estimated return on capital of a specific project. Main performance metrics
for identifying the financial difficulties related to loss in handling capital are introduced in the
context of KEF Ltd. Because all those practises that help to produce the best possible
performance are taken into account in the next cycle.
Benchmarking: This is amongst the most important strategic strategies that helps organisations to
set criteria to determine the efficacy of competition. In KEF SA, this solution would be
appropriate if customers are not happy and they lose their confidence every day to meet the
unique order problem (Kober, Subraamanniam and Watson, 2012).
Financial management: Financial regulation is known to be the best management method to offer
a clearer solution to the multiple market issues and reduce performance. It is a qualitative tool for
collecting useful information, tracking and control of financial resources and personnel to strive
to reach the most reliable results. It helps combat money fraud, so it facilitates KEF Ltd's
attempts to improve full records for any financial activity carried out in the industry so that
benefit can be maximised. Thus, capital deprivation is reduced and business performance is
increased. The technique also enables managers to identify market trends and hire qualified
employees for a special customer demand application at KEF Ltd. The financial problem has
something to do with financial irregularities in this business. They are not permitted to research
real business results. The barrier to the market is the absence of protection of money. The value
of the product cannot therefore be regulated and measured.
In order to define the monetary challenge, this company used benchmarking technologies (Zandi,
Khalid and Islam, 2019). In comparison to another organisation using this investigation, they
found errors in their financial statements and solved the issue. The main ways of calculating
productivity have also been used. They discussed and listed the financial repercussions of this
strategy. It has been encouraged by contrasting the exact cost of capital to the common valuation.

Comparison:
Tesco Sainsbury
Tesco uses automotive market and thus faces
money troubles connected to the marketing.
Business strategies also do not please
consumers.
Sainsbury includes numerous money
difficulties including the lack of management
of the money as well as the planned tactics.
The market control mechanism is used to assess
the optimum prices of the product, along with
improved profitability, in establishing
opportunities for the potential problem manager
in Tesco.
The inventory management mechanism is
used to deal with the problem of Sainsbury to
meet the quality standards of the development
of specialty items.
CONCLUSION
The above research showed that management has been viewed as a useful part of a business
which responsible for assisting study, comprehension and decision at top management. A variety
of systems and reports allow a manager to log each company operations and complete the
monitoring process. Furthermore, through use of expense method is often inferred in calculating
the overall net profit and in estimating production per product. Planning tools and their strengths
and drawbacks, which help budgeting, are analysed in a good condition in attempt to discover a
definitive answer. Reaction to these issues has been used in the estimation of money-related
issues in a company and MA method. It will be decided to answer these questions with a view to
ensuring maximum growth and sustainability throughout the future timeframe. MAS seem to be
the way to answer money problems in fewer periods. Like the previous segment of the company,
the dilemma was solved by a price optimisation method direction. Although its sales were
inadequate, they measured their pricing structure by adopting the aforementioned accounting
schemes, and the money problem of the company was resolved. Main measuring methods for
results were also used. They also discussed and addressed the financial ramifications of this
strategy. This has been supported by estimating and matching the actual value of the funds with
the normal value. On the basis of the project described above, MA can be supposed to help big
business handle various aspects. The research accounts for the planning of the sales report with
multiple methods, including absorption and marginal costs.

REFERENCES
Books and journals:
Anessi-Pessina and et.al., 2016. Public sector budgeting: a European review of accounting and
public management journals. Accounting, Auditing & Accountability Journal. 29(3).
pp.491-519.
Booth, P., 2018. Management control in a voluntary organization: accounting and accountants
in organizational context. Routledge.
Collis, J. and Hussey, R., 2017. Cost and management accounting. Macmillan International
Higher Education.
Grabner, I. and Moers, F., 2013. Management control as a system or a package? Conceptual and
empirical issues. Accounting, Organizations and Society. 38(6-7). pp.407-419.
Holsapple, C. ed., 2013. Handbook on knowledge management 1: Knowledge matters (Vol. 1).
Springer Science & Business Media.
Humphrey, C. and Miller, P., 2012. Rethinking impact and redefining responsibility: The
parameters and coordinates of accounting and public management reforms. Accounting,
Auditing & Accountability Journal. 25(2). pp.295-327.
Kober, R., Subraamanniam, T. and Watson, J., 2012. The impact of total quality management
adoption on small and medium enterprises’ financial performance. Accounting &
Finance. 52(2). pp.421-438.
Lachmann, M., Knauer, T. and Trapp, R., 2013. Strategic management accounting practices in
hospitals: Empirical evidence on their dissemination under competitive market
environments. Journal of Accounting & Organizational Change. 9(3). pp.336-369.
Morden, T., 2016. Principles of strategic management. Routledge.
Schaltegger, S., Burritt, R. and Petersen, H., 2017. An introduction to corporate environmental
management: Striving for sustainability. Routledge.
Siverbo, S., 2014. The implementation and use of benchmarking in local government: a case
study of the translation of a management accounting innovation. Financial
Accountability & Management. 30(2). pp.121-149.
Takeda, H. and Boyns, T., 2014. Management, accounting and philosophy: The development of
management accounting at Kyocera, 1959-2013. Accounting, Auditing & Accountability
Journal. 27(2). pp.317-356.
Zoni, L., Dossi, A. and Morelli, M., 2012. Management accounting system (MAS) change: field
evidence. Asia-Pacific Journal of Accounting & Economics. 19(1). pp.119-138.